Alstrynomics Job Cut Analysis

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Remember, Alstrynomics seeks the practical application of Economics. We know that 1.2 million Job-Cuts were announced in 2008. Generally, these cuts are at major corporations that are end the end of the line of the production or service process. For everyone of these employees, there are probably at least 5 or 10 others through the vendor support system.

Thus, if 1.2 million cuts were ANNOUNCED.....rest assured, the numbers of jobs cut that were silent was probably 5X to 10X that number. My estimation is that approximately 10,000,000 American's have lost their jobs in the last couple years. Add that to the systematic unemployment rate of about 5% and we should be well over 10% unemployment right now.

Then factor in all those people who have had pay cuts, furloughs, and demotions who can no longer meet their monthly subsistence payment obligations.....and we are probably looking at well over 15-20% functional unemployment right now.

My expectation is that these numbers will double or triple over the course of the upcoming year. You will see the layoff numbers getting larger and larger and spreading into industries not currenly affected. Remember, each time you see a layoff notice, there is some multiple of others likely also getting released at the same time.

Again, we havn't even factored in the spouses, who were previously not counted as unemployed, who will be forced to reenter the workforce to supplement the family income and now will be considered unemployed until they find a job.

30% unemployment is in the bag if we don't restructure.........or go to war.

Research has led to discovery of the heaviest element yet known to science. The new element, Governmentium (Gv), has one neuron, 25 assistant neurons, 88 deputy neurons and 198 assistant deputy neurons, giving it an atomic mass of 312.

These 312 particles are held together by forces called morons, which are surrounded by vast quantities of lepton-like particles called peons. Since Governmentium has no electrons, it is inert; however, it can be detected because it impedes every reaction with which it comes into contact. A minute amount of Governmentium can cause a reaction that normally takes less than a second to take as long as 4 years to complete.

Governmentium has a normal half-life of 2-6 years; it does not decay, but instead undergoes a reorganization in which a portion of the assistant neurons and deputy neurons exchange places. In fact, Governmentium's mass will actually increase over time, since each reorganization causes more morons to become neurons, forming isodopes.

This characteristic of moron promotion leads some scientists to believe that Governmentium is formed whenever morons reach a critical concentration. This hypothetical quantity is referred to as critical morass.

When catalyzed with money, Governmentium becomes Administratium, which has half as many peons but twice the number of morons.

I don't see 30% unemployment, but this one will be worse than the 74-75 or 81-83 recessions. I expect 10-12% by September of 2009, but states like Michigan could see 15%.

In Ohio yesterday, the unemployment website and phone systems were both overloaded and crashed due to first-time applications of those laid off in December. Today's ADP 693K announcement indicates Ohio was not the only state with an unemployment surge.

At Honda Ohio, the Civic line is down to three days per week. This same model eight months ago was cranking at maximum capacity. We are beginning to see second-round cutbacks. I think Alcoa's announcement was their second. Some companies cut on a 90-day rotation to aviod having to give prior notice if more than 10% of the workforce is affected. When a 9-10% cut is announced for a company I own, I assume they wanted to cut deeper in most cases.

The most telling stat I read yesterday (attributed to AARP by MarketWatch) confirms a trend I have suspected, but for which I had no supporting data. In 2008, 17% of the polled group said they tapped into their 401Ks though they had not planned to. My thought is that a good chunk of "sideline" money that bulls keep citing as a reason for a second-half rebound has been rebudgeted by households for 2009 family expenses. Many Boomers will not reexpose all their assets to the market after the Boomer wake-up call of 2008. Add in the cash that will be consumed by families to survive this downturn, and we'll be lucky if 60% of 2008 liquidations are available to redeploy in the market by the end of 2009.

I don't think we will reach anywhere close to 30% unemployment, but Alstry's alarmist number may still be closer than that of the average economist.

Obama is looking for "two-fer" infrastructure spending. This is a great idea - money that creates jobs quickly but also has the added benefit of supporting a second national goal. For example, weatherization of homes also reduces dependence on oil or coal and reduces pollution. The situation in Ohio shows why the two-fer vision may not happen. Money will first go to immediately critical projects like upgrading web and phone capacity for the unemployment surge. Any similar evidence of eating the seed corn will not be a good sign for a late-2009 recovery.